13 Reasons Kenyan Entrepreneurs Are Denied Loans

Traders at Kiambu Market
Traders at Kiambu Market.

A report by Wylde International has indicated that many Kenyan entrepreneurs miss out on loans with the lack of consistency in filing bank statements being one of the major factors.

In the 2022 report launched on Tuesday, May 25, Wylde international noted only 45 per cent of Small and Medium-sized Enterprises (SMEs) who applied for credit received loans in the last three years.

The inconsistent filing of bank statements was traced to the nature of businesses with most SMEs being agricultural-based hence depending on seasons of harvest.

Traders display mangoes at Riosiri market in Kisii County
Traders display mangoes at Riosiri market in Kisii County

The lack of collateral during loan applications also played a major role with the report adding that many entrepreneurs were forced to apply for smaller amounts. 

"The study also showed that about 45 per cent of the businesses engaged had their request for financing facility declined.

"This was majorly attributed to the high difficulties in meeting the financing requirements such as security i.e. title deeds/assets and audited accounts as reported by the respondents," read the report in part.

Additionally, banks and financial entities were also faulted for using similar loan evaluation criteria while analysing credit applications made by small and medium-sized enterprises (SMEs).

Nonetheless, negative Credit Reference Bureau (CRB) listing and poor past loan repayment also posed challenges for entrepreneurs.

In terms of business operations, it was noted that entrepreneurs were lacking requisite business permits with SMEs also failing to prove good cash flow.

"Most of the businesses engaged 64.4 per cent indicated that their turnover was below Ksh5 million with about 32.7 per cent reporting a turnover of Ksh5 to Ksh100 million.

"This could imply that most businesses surveyed were still at start-up phase with limited working capital and asset base," read the report in part.

Other factors include lack of bookkeeping and proper business records, lack of bank accounts, unawareness, less amount applied than their minimum loan amount, low turnover due to the pandemic effects, and lack of experience.

Undated Photo of the Central Bank of Kenya in Nairobi
A photo of the Central Bank of Kenya in Nairobi.


Despite the challenges, It was noted that many entrepreneurs depend on loans to grow their business with the report indicating that 93 per cent of entrepreneurs plan on applying for loans this year.

"Out of the businesses that are planning to get financing in the near future, most of them are seeking the funding for expansion 39 per cent while 36 per cent of them are looking for working capital for their businesses.

"Business expansion is the most preferred purpose of looking for financing, however, sufficient working capital is a key aspect of any business’s financial health; and not having enough working capital can have a serious adverse impact on the future of your business," read the report in part.